Willis places transaction protecting mining operation from Australian weather risks

Willis Group Holdings has designed and placed a new derivative-based risk transfer solution protecting a global mining venture against cyclone and heavy rainfall risk in Australia.

Under the transaction, which has a total limit of AU$56 million, Roy Hill Holdings will have protection against the financial impact of cyclones and heavy rainfall that could delay construction at what Willis says will be the largest single-site iron ore mining operation in Australia. The terms span two cyclone seasons, Willis notes.

The area under protection through the deal includes the company’s 55 million ton per annum mining, rail and port project currently under construction in the Pilbara region of Western Australia.

“The unique ‘cat-in-a-circle’ solution, structured and executed by Willis’s Global Weather Risk Practice, provides Roy Hill with event coverage based on the duration that a cyclone spends in the indemnification zone and the amount of cyclone-related rainfall across three Australian Bureau of Meteorology weather stations,” Willis’ statement notes.

The index-based cover differs from regular indemnity cover in that there is no requirement for the insured to prove any loss or damage to assets from the cyclone, and the indemnity is based instead upon the performance of the pre-agreed cyclone and rainfall indices, according to Willis.

The deal is backed by Endurance Global Weather, a global provider of weather risk management solutions.

“Traditional construction and property policies will cover the damage caused by a cyclone, but not the financial impact of project delays and additional wages where there is no damage to the insured assets,” Steve Hearn, deputy CEO of Willis Group commented in a statement.

“This bespoke solution was designed to cover this traditionally uninsurable risk, which Roy Hill identified as a particular concern,” he also noted.

“Willis leveraged its sophisticated analytical capability to model the probability and impact of cyclones and heavy rainfall in this region of Australia, enabling Willis to structure and execute a solution led by Endurance which responds to Roy Hill’s highly specific requirements.”